Value investors should check different markets and financial instruments to find the best available deals. Closed-End funds (CEFs) trading at a discount to net asset value (NAV, the net value of fund holdings) are a source of potentially attractive investment ideas. In a sense, they are on sale.
How do CEFs work? CEFs are mutual fund companies that buy and sell investments from a fixed pool of capital. Shares in CEFs are sold by current owners, often at prices that are lower than the sum of their holdings. When you buy a CEF, your investment pays expenses to the fund manager. The hope of CEF investors is that the return on their assets will exceed the fund manager’s expenses.
Below is a table of CEFs with discounts of more than 10%, dividend yields over 4%, and expense ratios lower than 2%:
Closed-End Fund (Ticker) | Strategy | Discount | Expense Ratio | Dividend Yield |
Global Income (GIFD) | Global | -21.06% | 2.00% | 5.34% |
Eaton Vance R-Mgd Eq Inc (ETJ) | Opt Arb/Opt Strat | -17.63% | 1.07% | 10.04% |
Eaton Vance TxMgdGlDvEIn (EXG) | Opt Arb/Opt Strat | -17.09% | 1.05% | 11.51% |
Eaton Vance Tx-Mg Gl B-W (ETW) | Opt Arb/Opt Strat | -16.48% | 1.09% | 9.77% |
RMR Asia Pacific RE (RAP) | Real Estate | -16.11% | 1.72% | 6.28% |
Eaton Vance T-M D-E Inc (ETY) | Opt Arb/Opt Strat | -16.06% | 1.06% | 10.90% |
Alpine Glbl Prem Prop (AWP) | Real Estate | -15.91% | 1.31% | 11.74% |
Adams Express Company (ADX) | Core Funds | -15.88% | 0.58% | 5.67% |
Calamos Glbl Dyn Inc (CHW) | Global | -15.51% | 1.98% | 6.73% |
Virtus Total Return (DCA) | Global | -15.48% | 1.90% | 4.89% |
Eaton Vance Tx-Ad Gl Opp (ETO) | Global | -15.10% | 1.49% | 6.90% |
Madison Str Sect Prem (MSP) | Opt Arb/Opt Strat | -14.98% | 0.98% | 8.06% |
Eaton Vance T-M B-W Opps (ETV) | Opt Arb/Opt Strat | -14.98% | 1.07% | 9.70% |
Zweig Total Return (ZTR) | Income & Pref Stk | -14.93% | 1.10% | 10.58% |
Nuveen Tx-Adv Float Rate (JFP) | Income & Pref Stk | -14.81% | 0.59% | 6.07% |
Eaton Vance Enh Eq Inc (EOI) | Opt Arb/Opt Strat | -14.79% | 1.15% | 8.95% |
Liberty All-Star Equity (USA) | Core Funds | -14.71% | 1.08% | 6.68% |
Eaton Vance T-M B-W Inc (ETB) | Opt Arb/Opt Strat | -14.45% | 1.12% | 9.05% |
Eaton Vance Enh Eq Inc 2 (EOS) | Opt Arb/Opt Strat | -14.24% | 1.13% | 16.24% |
Gabelli Div & Inc Tr (GDV) | Value Funds | -14.04% | 1.53% | 5.20% |
Petroleum & Resources (PEO) | Sector Equity | -14.04% | 0.64% | 6.80% |
Nuveen Eqty Prem Adv (JLA) | Opt Arb/Opt Strat | -14.00% | 0.85% | 9.48% |
Madison/Clay CC & Eq Str (MCN) | Opt Arb/Opt Strat | -13.99% | 1.31% | 8.29% |
BlackRock Str Eq Div (BDT) | Value Funds | -13.94% | 0.95% | 5.73% |
Nuveen Eqty Prem and Gro (JPG) | Opt Arb/Opt Strat | -13.92% | 0.98% | 8.02% |
Nuveen Eqty Prem Inc (JPZ) | Opt Arb/Opt Strat | -13.91% | 0.77% | 9.28% |
Thai Fund (TTF) | Pacific Ex Japan | -13.77% | 1.59% | 4.55% |
Lazard Gl Tot Ret & Inc (LGI) | Global | -13.75% | 1.59% | 6.72% |
Federated Enh Treas Inc (FTT) | Corp Debt BBB Rtd | -13.51% | 1.03% | 6.19% |
First Tr Enh Equity Inc (FFA) | Opt Arb/Opt Strat | -13.39% | 1.25% | 7.08% |
Royce Value Trust (RVT) | Core Funds | -13.31% | 0.23% | 4.17% |
AGIC Eqty & Conv Income (NIE) | Convertible Secs | -13.25% | 1.10% | 6.07% |
CBRE Clarion Glbl RE Inc (IGR) | Real Estate | -13.11% | 0.94% | 6.67% |
Nuveen Mlti-Strat I&G 2 (JQC) | Income & Pref Stk | -13.00% | 1.48% | 8.18% |
Eaton Vance Tax Div Inc (EVT) | Value Funds | -12.99% | 1.49% | 7.29% |
Royce Micro-Cap Trust (RMT) | Core Funds | -12.54% | 1.12% | 4.70% |
Zweig Fund (ZF) | Core Funds | -11.94% | 1.23% | 10.77% |
Nuveen Tx-Adv Div Growth (JTD) | Income & Pref Stk | -11.85% | 1.71% | 7.64% |
BlackRock Crdt All Inc 3 (BPP) | Corp Debt BBB Rtd | -11.72% | 0.98% | 5.73% |
Nuveen Mlti-Curr ShTrmGI (JGT) | Global Income | -11.68% | 1.13% | 9.16% |
Nuveen Eqty Prem Opp (JSN) | Opt Arb/Opt Strat | -11.62% | 0.75% | 9.60% |
BlackRock Enh Eq Div (BDJ) | Opt Arb/Opt Strat | -11.41% | 1.17% | 10.25% |
J Hancock Bank & Thrift (BTO) | Sector Equity | -11.31% | 1.36% | 5.81% |
Eaton Vance Tx-Ad Gl Div (ETG) | Global | -11.16% | 1.53% | 8.77% |
Swiss Helvetia Fund (SWZ) | Developed Market | -11.08% | 1.34% | 9.72% |
Nuveen Mlti-Strat I&G (JPC) | Income & Pref Stk | -11.04% | 1.54% | 8.26% |
First Tr/Abrdn Emerg Op (FEO) | Emerging Markets | -11.04% | 1.76% | 6.73% |
BlackRock Crdt All Inc 2 (PSY) | Corp Debt BBB Rtd | -10.96% | 1.01% | 6.06% |
Western Asset Var Rt Str (GFY) | Global Income | -10.88% | 1.06% | 4.16% |
BlackRock En Capital&Inc (CII) | Opt Arb/Opt Strat | -10.75% | 0.93% | 12.06% |
BlackRock EcoSolutions (BQR) | Sector Equity | -10.71% | 1.42% | 11.63% |
Morg Stan Emrg Mkts Debt (MSD) | Emerging Mkts Debt | -10.57% | 1.19% | 8.70% |
BlackRock Equity Div (BDV) | Core Funds | -10.55% | 0.83% | 6.37% |
MLP & Strat Eqty (MTP) | Sector Equity | -10.55% | 1.35% | 4.85% |
Liberty All-Star Growth (ASG) | Growth Funds | -10.53% | 1.79% | 6.14% |
Advent Clay Conv Secs (AVK) | Convertible Secs | -10.50% | 1.47% | 9.48% |
India Fund (IFN) | Emerging Markets | -10.47% | 1.32% | 19.18% |
DWS Glbl High Income (LBF) | Emerging Mkts Debt | -10.47% | 1.68% | 7.07% |
Nuveen Tx-Adv TR Strat (JTA) | Value Funds | -10.46% | 1.55% | 8.14% |
H&Q Life Sciences Invtrs (HQL) | Sector Equity | -10.44% | 1.47% | 7.86% |
BlackRock Crdt All Inc 4 (BTZ) | Corp Debt BBB Rtd | -10.44% | 0.96% | 6.31% |
Western Asset EM Income (EMD) | Emerging Mkts Debt | -10.33% | 1.23% | 6.30% |
Eaton Vance Tx-Ad Bd&Opt (EXD) | Gen & Ins Leveraged | -10.29% | 1.44% | 9.34% |
BlackRock Crdt All Inc 1 (PSW) | Corp Debt BBB Rtd | -10.24% | 1.05% | 6.10% |
Guggenheim Enh Eq Inc (GPM) | Core Funds | -10.23% | 1.80% | 10.34% |
BlackRock Intl Gr & Inc (BGY) | Opt Arb/Opt Strat | -10.16% | 1.11% | 15.81% |
Cohen & Steers Qual Rlty (RQI) | Real Estate | -10.01% | 1.98% | 7.88% |
There does not appear to be any clear relationship between dividend yield, market/NAV discount, and expense ratio:
The take-away lesson from this plot is that there does not seem to be a downside for selecting lower fees, higher dividends, and enormous discounts. One of these is not necessarily obtained by giving up another.
Further research is required to determine if the fund’s underlying holdings are investible. Here are flavors of the five most discounted funds:
Global Income (GIFD) is a fund of funds. Prudent investors have their work cut out for them: each of their funds would require research before investment.
Three of Eaton Vance’s funds (ETJ, EXG, and ETW) hold a host of large cap stocks and writes options on them. Option writing strategies are an attractive way to diversify an income portfolio, and these funds are even more interesting given the discounts on their holdings.
RMR Asia Pacific RE (RAP) is a fund of real estate investments in Australia, Japan, China, Singapore, and Hong Kong. Since some of these real estate markets are currently priced beyond financial reason, the RAP portfolio is not attractively valued, even considering the discount to NAV.
The list goes on, and each of these discounted funds is a candidate for additional research. As prudent investors, you must check fund holdings and strategies before investing. Good luck!
Disclaimer: This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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